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Multiple Directions for Measuring Biased Technical Change

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  • Hideyuki Mizobuchi

    (Faculty of Economics, Ryukoku University)

Abstract

Malmquist and Hicks−Moorsteen productivity indexes are the two most widely used indexes for measuring productivity growth. The former, which has been proposed initially, has a nice feature of decomposing productivity growth into two important sources: efficiency change and technical change components. The technical change component is considered measuring the distances between the isoquants along a single direction. When technical change is not Hicks-neutral and is biased towards certain factor inputs or outputs, the distance between the isoquants is dependent on the direction selected. In this case, if we adopt a single direction for measuring the distances, we can only locally capture technical change, which is a global phenomenon by nature. To rectify this problem, we propose a more global index of technical change that measures the distance between the isoquants by utilizing two directions. Along with the existing measure of efficiency change, this allows us to define a corresponding productivity index. This index turns out to be the geometric mean of the Malmquist and the Hicks-Moorsteen productivity indexes under constant returns to scale technology. While there has been a long discussion on which index is more preferable between the two productivity indexes, we give a justification to using the geometric mean of these two indexes.

Suggested Citation

  • Hideyuki Mizobuchi, 2015. "Multiple Directions for Measuring Biased Technical Change," CEPA Working Papers Series WP092015, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqcepa:107
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    File URL: https://economics.uq.edu.au/files/5094/WP092015.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Karagiannis, Giannis & Knox Lovell, C.A., 2016. "Productivity measurement in radial DEA models with a single constant input," European Journal of Operational Research, Elsevier, vol. 251(1), pages 323-328.

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    More about this item

    Keywords

    Productivity; Biased technical change; Malmquist productivity index; Hicks– Moorsteen productivity index;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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